G.R. No. 5194 - Chinese Chamber of Commerce vs. Pua Te Ching

On May 14, 1908, the Chinese Chamber of Commerce instituted an action against the defendants.
Central to the suit was a promissory note (No. 178) for P3,500, dated November 22, 1907, payable in Manila on January 22, 1908.
The note included specific details such as the amount in Philippine currency, the due date, and the sequence of internal-revenue stamps affixed (one 20-centavo, one 10-centavo, and three 2-centavo stamps).
The parties to the note were clearly identified, with the defendants’ names (Fua Tay Cheang, C. K. Bana, Fua Teching, Llmquieng Bi) appearing on the instrument.

The defendants answered with a general denial, which, under section 103 of the Code of Procedure in Civil Actions, implicitly admitted the genuineness and proper execution of the promissory note.
Owing to the defendants’ failure to make a sworn denial of the execution and delivery of the note, the facts stated in the complaint were deemed a prima facie case against them.
This admission shifted the evidentiary burden to the defendants, requiring them to specifically prove payment or settlement of the note.

During trial, the defendants introduced evidence suggesting that the original note had been paid by substituting it with another promissory note.
The plaintiff acknowledged the defendants’ attempt to delay the payment by offering a substitute note but maintained that he had refused the proposal.
It was confirmed that the defendants had made an actual payment of P216 on the note in question, leaving a balance of P3,284.

The lower court allowed the plaintiff to recover not only the outstanding balance of P3,284 but also interest at the rate of 12%.
The defendants objected on the ground that the promissory note did not contain a provision for interest, hence no interest should be allowed.
The plaintiff testified about an agreement that interest was to accrue at 12% from the date of the note until full payment, a fact partly corroborated by the admission of one of the defendants who acknowledged payment of interest up to May 13, 1908.
The lower court based its award of interest on Article 1108 of the Civil Code, which provides for interest in the absence of an express stipulation to the contrary when the debtor is in default.

The defendants further contended that the plaintiff lacked authority to loan money on promissory notes and therefore could not bring an action on the instrument.
The plaintiff successfully demonstrated that it was a duly organized corporation under the prevailing laws of the Philippine Islands.
By accepting the funds represented by the promissory note and entering into the contract, the defendants were estopped from challenging the plaintiff’s corporate existence or its authority to enforce the note.
This principle was supported by references to established case law, affirming that parties making contracts with a corporate entity cannot later deny its legal existence.

Several decisions and legal principles were cited to bolster the prima facie case for the plaintiff, including rulings in Noel vs. Lasala, Merchant vs. International Banking Corporation, and others.
The evidentiary rule that the burden of proving payment lies with the defendant was underscored by cases such as Knight vs. Whitmore and McCormick Harvester Co. vs. Doucette.
The interplay between the admitted general denial and the evidentiary requirements further solidified the plaintiff’s position in the suit.

Whether the evidence of the promissory note’s execution and delivery, as admitted by the defendants through their general denial, was sufficient to constitute a prima facie case in favor of the plaintiff.
Whether the defect in an express stipulation for interest on the promissory note precluded the recovery of interest, despite the alleged agreement between the parties.
Whether the substitution of the promissory note and the partial payment of P216 by the defendants effectively discharged or reduced the underlying obligation.
Whether the plaintiff had the requisite authority to act on behalf of its corporate entity and bring an action upon the promissory note, given the defendants’ later contention regarding corporate existence.